Andrew Foyle

Earlier this week, the Lord President delivered the judgment of the Court in the appeal from the Sheriff Appeal Court concerning the case of Cabot Financial (UK) Limited v Catherine Weir [2021] CSIH 64. In the case, the Inner House of the Court of Session was asked to consider the question of whether an award of expenses on an “agent/client, client paying” basis was apt to include a success fee payable by the defender to their solicitor in terms of their letter of engagement.

Where a court awards the expenses of litigation against a party to the litigation, this is generally done on the “party-party” scale, which is set out in an Act of Sederunt. There are, however, two other scales upon which the court can award expenses if they consider it appropriate to do so. These are the “agent/client, client paying” scale and the “agent/client, third party paying” scale. The former is generally considered more generous than the latter, and closer to a full indemnity against the costs of litigation. However, even in these more generous awards there are limits.

In Cabot Financial, the Inner House was asked to consider the question of whether an award of expenses on an “agent/client, client paying” basis was apt to include a success fee (in this case an uplift of 70 per cent of the fees) payable by the defender to their solicitor, in terms of their letter of engagement.

Whilst the auditor had allowed the defender the uplift in expenses, and considered that the award was akin to a full indemnity, following a note of objections this was overturned by the sheriff. An appeal to the Sheriff Appeal Court was not successful and so the defender appealed to the Inner House.

The Inner House largely agreed with the reasoning of the sheriff at first instance. The court examined the historical development of the rules relating to awards of expenses. It found that “in the taxation of any account in respect of which there has been a finding in expenses in the course of litigation, whether the scale is party and party or agent and client, the allowable expenses must relate directly to the litigation”. Put another way, the charges that a party may claim require to be for work done as part of the judicial process. Not for charges incurred outside of that process.

Applying that rule to the success fee claimed in this case, the court concluded that the success fee was not a charge incurred as part of the judicial process. Rather it was an agreement between the solicitor and their client which is “outwith the boundaries of the process.” It’s effectively an incentive to the solicitor to take on the case and is not related to the work actually carried out in progressing the litigation. As a result, it could not form part of the allowable expenses in an agent/client account.

As a result, it appears that in those relatively rare cases where expenses are awarded on an agent/client basis, a solicitor acting under a speculative or similar arrangement may not claim their success fee as part of that award. Importantly, the client will remain liable to their solicitor for that sum. Moreover, the award cannot be seen as a complete indemnity against the costs of pursuing the action for the court may disallow any items which do not form part of the work carried out in furtherance of the litigation. Furthermore, the court may disallow “extravagant claims” as part of their supervisory jurisdiction.

Andrew Foyle is a partner at Shoosmiths LLP.